BEA beats rivals with impressive financial results

Bank of East Asia appears to have emerged as the winner in the latest round of results announcements among leading listed banks in Hong Kong, as a clean balance sheet and sound growth momentum impressed investors more than international peers HSBC and Standard Chartered.

Hang Seng Bank, the Hong Kong subsidiary of HSBC, is regarded cautiously by analysts, due to its outlook for slow income growth. Its results were boosted by an accounting change reflecting a capital gain in its China subsidiary Industrial Bank, but otherwise analysts argue that it faces flat income growth.

An emerging economic recovery in developed countries and an anticipated rise in interest rates would eventually help HSBC and Standard Chartered, analysts said.

Meanwhile, local banks have emerged as the preferred picks for investors who are focused on the contribution of mainland-related operations to topline growth.

Investors are focused more on the opportunity for growth in the mainland market rather than the risks of deteriorating credit quality that dog dominant Chinese banks, analysts say.

"BEA is well positioned with its BEA China operation," said Steven Chan, an analyst at Maybank Kim Eng. "Though there is a risk in the China business [in terms of deterioration of asset quality], the growth potential outpaces the risks."

Some analysts said they were concerned about credit quality on the mainland and capital adequacy at BEA, but the numbers for last year showed gradual improvement. The bad loan ratio edged up slowly from 0.38 per cent at the end of June to 0.39 per cent to the end of December. Core tier one capital improved to 11.4 per cent from 10.4 per cent.